Google, Other Search Engines Put on Notice by FTC About Online Ad Labels

By Todd R. Weiss |
Posted 2013-06-26

Google, Other Search Engines Put on Notice by FTC About Online Ad Labels

The U.S. Federal Trade Commission is going after search engine companies such as Google, Yahoo, Bing and others to remind them that all sponsored online advertisements in search must be clearly marked or delineated as paid ads to avoid any deception of consumers.

The FTC's Bureau of Consumer Protection had established such rules back in 2002, but a reminder effort is being made now because the FTC has "observed a decline in compliance," according to a June 24 letter issued by the agency.

The 2002 letter advised search engine companies "about the potential for consumers to be deceived, in violation of Section 5 of the FTC Act, unless search engines clearly and prominently distinguished advertising from natural search results," the agency reports. "After the 2002 Search Engine Letter was issued, search engines embraced the letter's guidance and distinguished any paid search results or other advertising on their websites."

Because of the prevalence of mobile devices and other new ways for consumers to conduct searches, things have blurred and backtracked somewhat, the agency reported. That's where the call for a renewed focus on labeling of online advertisements as paid ads comes into play.

"Although the ways in which search engines retrieve and present results, and the devices on which consumers view these results, are constantly evolving, the principles underlying the 2002 Search Engine letter remain the same: consumers ordinarily expect that natural search results are included and ranked based on relevance to a search query, not based on payment from a third party," states Engle's letter. "Including or ranking a search result in whole or in part based on payment is a form of advertising."

To avoid such possible deception, "consumers should be able to easily distinguish a natural search result from advertising that a search engine delivers," the letter states. "In recent years, the features traditional search engines use to differentiate advertising from natural search results have become less noticeable to consumers, especially for advertising located immediately above the natural results ('top ads')."

Another change that's come over the past several years from search vendors is that "many general search engines now often integrate or offer specialized or vertical search options as part of their search service," according to Engle's letter. "This allows consumers to narrow their search to particular categories of information, such as news, images, local businesses, or consumer goods." The complication with that, she wrote, is that "sometimes the results returned as part of a specialized search are based at least in part on payments from a third party. If that is the case, it is also a form of advertising and should be identified as such to consumers."

To ensure continued adherence with the 2002 search rules, the FTC recommends that search engine companies take several steps to maintain compliance, wrote Engle. The steps include clearly identifying sponsored, paid ads in search using prominent, contrasting shading or other means to make them stand out as paid, as well as text labels that clearly mark such ads in search.

"In addition to the visual cues a search engine may use to distinguish advertising, it also should have a text label that: (1) uses language that explicitly and unambiguously conveys if a search result is advertising; (2) is large and visible enough for consumers to notice it; and (3) is located near the search result (or group of search results) that it qualifies and where consumers will see it," the letter states.

Google, Other Search Engines Put on Notice by FTC About Online Ad Labels

Steps also need to be taken to ensure that future innovations in online search continue to take these issues into consideration so they remain a visible part of future search engines, wrote Engle. "Indeed, in the past few years, the growth of social media and mobile apps, and the introduction of voice assistants on mobile devices, have offered consumers new ways of getting information," she wrote. "Regardless of the precise form search may take in the future, the long-standing principle of making advertising distinguishable from natural results will remain applicable."

By reminding the search vendors of their responsibilities under the existing FTC rules, the agency hopes to keep the issue always on the minds of search engine employees, wrote Engle. "Search engines provide invaluable benefits to consumers," she wrote. "At the same time, consumers should be able to easily distinguish natural search results from advertising that search engines deliver. Accordingly, we encourage you to review your websites or other methods of displaying search results, including your use of specialized search, and make any necessary adjustments to ensure you clearly and prominently disclose any advertising. In addition, as your business may change in response to consumers' search demands, the disclosure techniques you use for advertising should keep pace with innovations in how and where you deliver information to consumers."

In a statement to the Reuters news agency, Google said that clear labeling and disclosure of paid search are important to the company and that it has "always strived to do that as our products have evolved," the Guardian reported.

In May, reports surfaced that Google is the subject of a new, fledgling antitrust probe by the FTC in connection with how the company is selling and marketing its online ads, which are at the heart of Google's annual revenue. The inquiry focuses on tools acquired when Google bought display ad company DoubleClick in 2007, according to earlier reports from Reuters.

In January, Google received what was essentially a hand slap from the FTC after a 19-month investigation into prior allegations that the company had been manipulating its search algorithms to favor Google's results over competitors. The FTC ruled that not enough evidence existed to prove such allegations. Instead, the company entered into a voluntary agreement with the FTC to change some of its business practices.

Google could have been hit with a government sledgehammer in connection with charges of anticompetitive behaviors against rivals, but instead the search giant came away with a much less damaging fate, which was heavily criticized by rivals in the tech market, including Microsoft.

In the January agreement with the FTC, Google stipulated that it would end some of its past business practices that could stifle competition in the markets for popular devices such as smartphones, tablets and gaming consoles, as well as the market for online search advertising.

Under a binding settlement with the FTC, Google will allow competitors access "on fair, reasonable, and nondiscriminatory terms to patents on critical standardized technologies needed to make popular devices such as smartphones, laptop and tablet computers and gaming consoles," according to the FTC.

Google also agreed to stop misappropriating—or scraping—the content of its rivals for use in its own specialized search results, and to drop contractual restrictions that impaired the ability of small businesses to advertise on competing search advertising platforms, according to the FTC.

In April, the search giant finally resolved antitrust allegations in Europe by agreeing to improve how it labels ads in its search results and how it displays links to competitors, according to a previous eWEEK story. European regulators had been investigating antitrust allegations against the company since 2010. Under the deal, Google will provide better labeling of its own promoted content and will improve how it displays links to competitors' online ads.

Under the deal, Google didn't have to change the algorithm that produces its search results.